Relative Strength: The Strongest Large-Cap Stocks

The S&P 500 index looks to be heading higher once again after finding support near the pivotal 1600 level. With it appearing that stocks are going to continue to move up, I always prefer to take positions in the strongest ones. When the S&P pulled back by about 7% between May 22 and June 6, strong stocks barely dropped, or even went higher during that time. With the overall market once again looking to get bullish over the short term, this should add additional fuel to these four relative strong stocks, already making new 52-week highs.

Pioneer Natural Resources (NYSE:PXD) is up 8.05% in the last week and 50.26% in the last 6 months. Since the start of June the stock has really started to push higher, breaking through the former 52-week and leading the major indices. With strong stocks, sometimes you have to take the price you can get or miss the boat. That said, picking it up between $154 and $147 would be ideal, with a stop at $141. If the stock drops below $141 a larger correction is likely about to commence. A target in this stock is hard to pinpoint, as with any stock in the throws of a major run; varying trend channel methods provide targets near $170 all the way up to $200.

Micron Technology (Nasdaq:MU) is up 7.34% over the last week and 100.73% over the last 6 months. As of right now, it shows no signs of slowing down. On the contrary, it is still outpacing major indices and saw barely any pullbacks at all in May and early June, when the S&P 500 was declining. I like the entry around the June 18 close at $13.75 (or in relatively close proximity to it). Place a stop at $12.40, which is just below the June 12 low, and target in the $16 region.

CME Group (Nasdaq:CME) has been moving straight up since the start of May, up 6.76% for the last week and 52.94% over the last 6 months. So far it hasn't relented, continuing to track higher even while the major indices saw pullbacks. This stock hasn't been above $71 since 2008, and based on those long-term charts there isn't any historic resistance until the stock approaches $90. The main problem with this one is controlling risk. Since the buying has been so strong there aren't many ideal prices to put a stop. I'd place a stop at $71.50 initially, but look to move it up (to a higher swing low) as soon as there is any sideways action or a pullback followed by another move higher.

SanDisk (Nasdaq:SNDK) is also up 6.36% in the last week and 47.74% in the last 6 months. It moved sideways through the latter part of May and early June, which was a sign of strength since the major indices dipped during that time. Over the last two sessions (June 17 and 18) SanDisk broke higher and is looking to be heading toward a target of $66. This target is based on a trend channel projection. $60 should now act as support following the breakout higher, so a stop can be placed below that. Until the stock drops below $56.25 the uptrend remains in place though.

The Bottom Line
In a bull market, it pays the most to be long the strongest stocks. With prices pushed up so rapidly, playing with such high momentum can be risky, though, if sentiment turns. Even when long in a strong stock, use stops to limit risk and have a plan for taking profits. Just because a stock is relatively strong doesn't mean it will go up forever, so take profits based on a pre-established method. Relative strength changes over time; these stocks are strong, but a couple weeks down the road others may take over. Right now though, these are some of the strongest large-cap stocks on the market. Until they begin to lag behind the gains of, or drop more than, the S&P 500 I believe these stocks should continue to do well over the near term.

Charts courtesy of StockCharts.com

At the time of writing, Cory Mitchell did not own any shares in any of the companies mentioned in this article.